NSE LIVE! Inflation, low corporate earnings drag equities down

Nigerian equities recorded second consecutive negative trading session on Tuesday as concerns over rising inflation and corporate warning on low earnings mitigated the otherwise positive influence of dividend recommendations by many leading stocks.

The two key indices at the Nigerian Stock Exchange (NSE)- the All Share Index (ASI) and aggregate market value of all quoted companies, dropped for the second consecutive day, pushing up the negative average year-to-date return back to double digit.

The ASI- a value-based index that tracks prices of all quoted companies, indicated a decline of 0.42 per cent to close at 25,745.13 points as against its opening index of 25,853.58 points.  Aggregate market value of all quoted equities also dropped by N37 billion from N8.893 trillion to close at N8.856 trillion.

The decline pushed the negative average year-to-date return back to double digit at -10.11 per cent. The downtrend on Tuesday was sustained by widespread sell off across the sectors and stock groups as investors reacted to announcement that inflation had reached three-year high.

The National Bureau of Statistics (NBS) on Tuesday announced that headline inflation had risen to 11.4 per cent by February as against 9.6 per cent in January. Inflation has been on the rise since December 2014. The current inflation rate is the highest recorded since December 2012.

Besides, Ecobank Transnational Incorporated (ETI) announced that it may record lower profit in 2015, triggering a massive sell down of the shares of the holding company. With the underlying profit-taking trend continuing, the stock market entered fully into the bear zone.

For every gainer, there were two losers. The announcement of a final dividend of N1.55 per share by Zenith Bank International failed to lift the market up.

Nigerian Breweries, NSE’s second most capitalised stock, led the losers with a drop of N4 to close at N93. Ecobank followed with a drop of N1.75 to close at N16.26. Seplat Petroleum Development Company lost N1 to close at N350. Oando declined by 51 kobo to close at N4.82 while Guaranty Trust Bank lost 41 kobo to close at N16.20 per share.

Total turnover was above average with the exchange of 287.04 million shares valued at N2.67 billion in 4,571 deals. United Bank for Africa, which announced dividend recommendation on Monday, was the most active stock with a turnover of 71.81 million shares valued at N269.17 million in 553 deals. Zenith Bank, which announced dividend recommendation on Tuesday, was the second most active stock with a turnover of 31.19 million shares worth N403.55 million in 425 deals.

Read also: NSE LIVE! Equities break rally as profit-taking kicks in

Against the 26 stocks that suffered losses, 13 stocks played the contrarian against the downtrend. Dangote Cement, NSE’s most capitalised stock, led the gainers with a gain of N2 to close at N164. Conoil rose by N1.86 to close at N20.10. Okomu Oil Palm added N1.57 to close at N33.07. Seven-Up Bottling Company gathered 57 kobo to close at N154 while Stanbic IBTC Holdings rose by 55 kobo to close at N15.30 per share.

“We are of the view that current dynamic in the market is driven by a cocktail of profit warnings – as highlighted by selloffs in Diamond Bank and ETI, earnings releases – as seen in UBA as well as profit taking, given the volume of news flow filtering into the system. With the above in mind, we strongly advise investors to stick to stocks with sound fundamentals and solid dividend history,” analysts at Afrinvest Securities stated.

 

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